Category Archives: Responsible Investing

Optimal returns, for a given risk level, are on the efficient frontier – a statistical fact demonstrable by financial engineers. A market portfolio, or the index, is on this frontier,

It has long been known by investment analysts that optimising risk and return (which is their job) is achieved by tracking the market. Experienced managers, analysts and data all consistently say that, if you want to invest in the stock market buy the index. And hold it.

Young bucks, and old, would like to beat the market. Some might do so for a limited time period. But no one has consistently done so. Why? Because to beat the market you have to consistently do better than everyone else. That is cocky and statistically very unlikely.

The opportunity to make better bets than everyone else has declined in recent years as computerised portfolio management and trading has grown and index investing has become the principal approach of behemoths which control sizeable fraction of global share trading, like BlackRock.

In addition, some data suggests that taking higher risks can in fact lower your expected return, as appeared to happen in the 2000s. We are now 9 years into a bull market with little regulatory reform, growing political uncertainty and upward pressure on interest rates (which might attract capital from equities to debt).

The return to risk shrunk as the financial bubble of the early 2000s grew.

The people who beat the market are the ones who take fees (from you) for handling money, or have inside information.

There are reasons to choose a narrower portfolio of listed equities. You might want to restrict your investment to a country, region or industry, or avoid places or sectors. But to try to pick stocks requires a consistent focus and adaptability. If you are going to do it yourself, fine. But if you are paying someone else, they generally have an incentive to take risks with your money that they mightn’t with their own. And of course their fees eat in to your capital.

So, simply, if you wish to diversify your savings beyond property (your home usually) or debt (bank deposits etc) by putting some in the stock market be careful not to be blinded by the attraction of “expected return” ignoring the danger of risk, and the cost of fees. So buy a low load (i.e. low fees), index (i.e. market tracking) fund.

(If you wish to use your capital to make a difference you might consider directly investing in small businesses. This has become more accessible with crowd funding opportunities. Or you might invest directly in a local business or a sector for which you have a passion, for example Green, Ethical, Socially Responsible businesses. But all of these options demand more care (“due diligence”) and should be approached with awareness that you can loose all of your investment, and sometimes more if you sign up for that. )

And remember, most people make money by working, not gambling. Gambling is more likely to break your fortune than make it.

This article by David Webb is insightful and brief. You may have no interest in Bitcoin, however, his observations are relevant to banking and the financial system. For me, one conclusion is that it is immoral to support (buy) bitcoin, on the level of gambling, and, if you understand it as a pyramid scheme, morally worse than gambling because the scheme is destabilising and fraudulent (in that people don’t know what they are getting in to).

Summary: So long as we have governments with the power to tax and spend in their own currencies, digital pseudo-currencies will never gain traction. Bitcoin and its imitators are a zero-sum game in which the sum of all fiat currency paid for it is the sum of all fiat currency received for it, excluding mining costs. The earlier participants are now cashing out the billions that newcomers are putting into this distributed Ponzi scheme. Play it for entertainment value if you want, but remember that you are purely betting on the greater stupidity of others.

The wife of a successful entrepreneur once remarked to me that she had pointed out to her husband that there will always be someone else with a bigger yacht in the marina. She was hinting that it’s fine to work, but there’s a point at which you ought to stop and spend a bit of time with your family and friends. She’s since divorced (for him it’s the second time!).

Another boating analogy was shared by The Economist recently in a comment about the asset management industry entitled Living off the people. As an asset manager, investing other people’s money, it was pertinent to my profession. The article offers a synopsis of the fund management industry and the challenges it faces today, the principal one being “Is there any use for fund manager’s at all?” The evidence has been around for decades, and now is being more actively referenced, that paying someone to beat the index is a fool’s game.

You can’t consistently beat the index, and if you have to pay someone to try, that’s going to cost you even more, so don’t even try. Just invest in a low fee index fund, like one offered by Vanguard. The article points out that a quarter of American billionaires work in finance and investment and concludes with a quote from a pre-war Wall Street mogul “Where are all the customers’ yachts?” Instead pay a computer pennies to put yo u on the efficient frontier.

There has been an outpouring of love and solidarity because of the tragic and terrific blood-letting in Paris this weekend. It has been a synchronous focus on thought, feeling and action by millions around the world. That is good.

The answers proposed have ranged from black to white, from vengeance to forgiveness. (My preference is at the “healing the wounds” end of the spectrum, rather than at the “ripping more flesh apart” end.) The personal grief is inevitably traumatic. The reasons for young people to wreak blood and havoc and kill themselves are difficult to imagine, let alone comprehend. But there are answers – there must be: we are humans and we can do it all.

So what will we choose?

Walking around the garden as the light fades and the wind builds to another stormy night, it seems clear that the warnings are coming thick and fast. It seems as though everyday another report comes in of violence, terror, corruption and injustice, and of storm, drought, flood, habitat destruction and species loss. You can see, hear, feel the immorality of human systems and the pain of nature. Do we look, listen, touch?

There are two kinds of people: People who can see what’s going on and do something about it (i.e. you, people with access to media, educated etc). The more resources they have, the more they can do something about it. The other kind of people who are those who are too poor to be able to know what’s going on (most people know corruption when they see it and crazy weather when it passes), or if they do, live subsistence lives so have fewer choices.

It is increasingly evident that of those of us who can act, some act and others don’t. Some have realised that the system must change and others continue to turn a blind eye. Those who have realised it start with awareness and gradually start to change their behaviour, from diet to lifestyle to job to investment, commitment and philanthropy.

Others who turn a blind eye, should open them. Elites – the people who influence and control human system (millionaires etc) – seem to be predominantly in the blind eye department. That’s bad.

It must be that rich people are ignoring the obvious because they are the ones that determine the system, which is not working, and they remain largely ignorant of how to change the system and what to change it to. Even when the how and what are obvious, admission of the need and course are slow, implementation is sluggish and patchy.

Here’s a quick example: behaviour change is nurtured with education, but education systems are well behind the curve. (Many observe that terrorism is inculcated by misinformation which would be hindered if critical thinking, even thinking, was a basic product of universal education.)

And a biosphere dysfunction example: 2015 is the hottest year on record and climate has risen 1 degree already yet fossil fuel companies are still subsidised and the so called “Sustainable Development Goals” are still talking about growth.

That’s the situation in a nutshell. Things are bad. We know how to change. Too few of the people at the top are changing.

That’s a dangerous recipe. You, like me, can make a difference. Let’s all take a step in the right direction. Slow down. Take a breath. Say sorry. Change the system from fear and greed to love and sharing. Do it now. May be we’ve still got time.

A former hedge fund manager who bought a drug company has hiked the price of a generic drug 55x to pay for the purchase. The drug was $13.50 a dose but is now $750.00. It costs $1 to produce. The drug treats toxoplasmosis and is widely used by sufferers of AIDS.

So clearly Martin Shkreli, the capitalist in question, is all about the money. No morals. No philanthropy. In fact rather the opposite. What does that say about our society? When the winners take all? It’s not that he should be punished. It’s not that his wealth should be confiscated. It’s that we should ask ourselves what kind of civilisation we are choosing when this kind of behaviour appears “justifiable”, because it doesn’t seem just to me.

If the highest achievers, the brightest stars, the richest, the winners are only interested in taking more, shouldn’t we all wonder what morals our civilisation promotes? It’s not that people are bad – everyone’s “good”. But the result of all our choices promotes a dynamic which appears quite feudal and therefore inflexible, often unfair and probably dysfunctional. Certainly we are seeing the cracks in our civilisation – economic crisis, immigration crisis, food crisis, …

The solution? Change our choices. Each of us can make small changes which determine the shape of civilisation. What we eat, what we wear, what we consume, what we waste. Our individual behaviour results in the civilisation we have, including a hedge fund manager taking more stuff from people in already difficult circumstances.

The move has been welcomed by Convention on the International Trade in Endangered Species (Cites). They are concerned not just with the impact of environmental crime on species but also with the effect on political stability.

Members of the public who have any information on the possible location of the fugitives can use this form to contact Interpol. Information can also be given anonymously to any national crime stoppers programme.

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The Global Nutrition Report said that globally, malnutrition led to “11% of GDP being squandered as a result of lives lost, less learning, less earning and days lost to illness.”

And the numbers are made more appalling by the fact that they cut both ways: not enough food and too much food. Every nation except China (whose regions could probably be included if you separate urban and rural) had crossed a “malnutrition red line”, suffering from too much or too little nutrition.

On the sad side of the spectrum the UN World Food Programme estimates that poor nutrition causes nearly half of deaths in children aged under five, that’s- 3.1 million children each year. In addition lack of food restricts brain and immune system development.

At the fat end of the wedge the problems include obesity, diabetes, vascular disease.

Ironically half of the countries are grappling with under-nutrition and also over-nutrition problems!

You would think that bi agribusinesses and food companies would have helped but they seem to exacerbate the problems by pushing sugar to the overfed and pulling livelihoods from the underfed.

Peddlers of both chemicals and genetically engineered seeds claim that GMO food is “identical to non-GMO products.” They claim that genetic engineering is no different than plant hybridization, which has been practiced for centuries. It is the reason they gave, and the EPA accepted, for not having to submit GMO food to rigorous testing to obtain EPA approval. It’s up to the companies that manufacture GMOs to research and determine the safety of their products.

Not only are the bacteria genes themselves potentially toxic, but the plants can be sprayed directly with herbicides, the herbicide-resistant plants absorb the poisons and we eat them. It’s difficult to understand how this can be considered “essentially” the same as plant hybridization.

Of the 144 crops approved by the FDA, 75% have been genetically engineered to either withstand direct applications of herbicides or they contain an insecticide Bt toxin, or both. In the mid-’90s, scientists figured out how to combine more than one trait in the same plant. These were first released in 1997 and are called “stacked gene traits.”

In 2012, 93% of all soy, 88% of the corn and 94%U.S. was genetically engineered.

Glyphosate use increased 6,504% from 1991 to 2010

Glyphosate residues of up to 4.4 mg/kg have been detected in stems, leaves and beans of glyphosate-resistant soy, indicating metabolism of the herbicide. This means that the Roundup ReadyTM plants are absorbing the herbicide and you cannot simply wash it off

Cancers of the thyroid and liver especially seem to track with the advent of GE crops and associated glyphosate applications. Thyroid cancer seems to affect women more often, while males are more susceptible to liver cancer.

The Academy of Environmental Medicine has issued a position statement on GMO food stating, “…several animal studies indicate serious health risks associated with GM food consumption including infertility, immune dysregulation, accelerated aging, dysregulation of genes associated with cholesterol synthesis, insulin regulation, cell signaling, and protein formation, and changes in the liver, kidney, spleen and gastrointestinal system. “There is more than a casual association between GM foods and adverse health effects. There is causation as defined by Hill’s Criteria in the areas of strength of association, consistency, specificity, biological gradient, and biological plausibility. The strength of association and consistency between GM foods and disease is confirmed in several animal studies.” They further state that “because GM foods have not been properly tested for human consumption, and because there is ample evidence of probable harm,” they call on physicians to educate the public and warn their patients to avoid GM foods.

People are ill and they are not waiting for scientists to tell them that GMOs are making them ill. Rachel Linden said in an interview on Weekly Women’s GMO Free News, “I don’t know why science has replaced common sense. I don’t need to check with my doctor to know how I feel when I eat GMOs and how I feel when I don’t eat GMOs. I don’t need a scientist to tell me forty years from now that they were wrong about GMOs. I’m going to decide for myself right now.” Case studies are piling up of patients who have shown dramatic improvement after taking their doctor’s advice and eliminating GMO food. Wouldn’t that be so much easier if they had labels?

The US EPA is set to approve new GM seeds and toxic sprays made by Dow Chemical in the face of scientific opposition.

There are millions of dollars on the table. Dow will take market share and expand the use of mono-culture and toxic sprays. These initiatives are inherently unsustainable, but in the short term will make money for executives and shareholders of Dow.

GM, monoculture and toxic herbicides and pesticides are unsustainable because they require huge fossil fuel inputs to operate.

They are dangerous because they encourage the development of super-weeds and introduce risks of transgenic hybridisation which can decimate habitats and local species.

The extensive use in Argentina of genetically engineered soy crops combined with spraying since 1996 is well documented. The tragic consequences of this strategy, which has enriched politicians and landowners at the expense of normal people, are visible.

According to Dow, heavy use of Roundup, herbicide Monsanto brand glyphosate, triggered an explosion of herbicide-resistant “super weeds” that are hard for farmers to fight and which can choke off crop yields. Such weeds now infest roughly 70 million acres of U.S. farmland.